European energy and commodity markets shifted into a high-volatility phase this week as a "perfect storm" of geopolitical and climatic pressures ended the recent period of soft fundamentals. While gas storage remains healthy at 65.2% as of January 17, the market narrative has pivoted sharply toward scarcity concerns as gas prices soared by 40% amid colder forecasts for the final week of January. These dynamics, coupled with a jump in U.S. natural gas futures on similar weather outlooks, have intensified heating demand expectations and increased the sensitivity of EUAs to short-term fuel-switching. Higher gas prices are increasingly supporting emissions from the power sector by favoring coal-fired generation, contributing to EU carbon prices hitting their highest levels since August 2023.

On the policy and macro side, the EU’s publication of its revised 2026 auction calendar and continued ETS reforms are highlighting impending cost shocks for producers and tightening supply expectations. Markets remain on edge as the World Economic Forum in Davos unfolds against a backdrop of historic trade developments, such as the EU-Mercosur deal, and renewed geopolitical tension as the U.S. threatens tariffs over Greenland. While analysts suggest Europe is unlikely to strike back via LNG levies, the combination of maritime inclusions, allowance cancellations, and Market Stability Reserve dynamics continues to support a bullish medium-term outlook. These structural drivers, alongside a briefing on the seven key events shaping the 2026 market, suggest that while energy volatility dictates near-term moves, the underlying supply squeeze remains the primary narrative for the ETS.

Auction volume: 10.75 million EUAs, 1.32 million more than last week.

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Energy Fundamentals

• Gas storage currently sits at 50.4% (January 17, 2026)
• EU and Mercosur seal historic trade deal
• Markets on edge as Trump threatens more tariffs on Europe over Greenland
• World Economic Forum Annual Meeting in Davos
• US Natural Gas Jumps on Colder Outlook for Last Week of January
• Gas prices soar 40% amid 'perfect storm' of pressures
• Europe unlikely to strike back at US levies via LNG – analysts
• Revision of the EU emissions trading system
• EU Carbon Prices Hit Highest Since August 2023: What Causes The Surge?
• EU ETS reform: impending cost shocks for EU producers
• BRIEFING: 7 key events that will shape the EU ETS in 2026

Investment Funds

• Investment funds increased their net long position to +125.58m EUAs on January 9th (vs. +114.98m EUAs on January 2nd).
• Gross short positions decreased to -27.5m EUAs (vs  -28.72m EUAs).
• Gross long positions increased to 153.08m EUAs (vs. 143.7m  EUAs).

Market Prices:

• Indicative Dec26 EUA Price: € 89.47
• Indicative Spot EUA Price: €87.49
• YTD Spot EUA Price: € 74.647
• MTD Spot EUA Price:  € 87.213

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Chart A: December 2026 EUA Price (EUR)

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Technical Analysis

Price action in Dec-26 EUAs has faced a sharp reversal this week, with the contract undergoing a significant rejection at recent highs near 92.00 and closing with a bearish candle that has neutralized much of the prior upside bias. The price has retreated to test the 20-day Moving Average (88.85) and the EMA (89.03), which currently serve as immediate support levels. While the broader rising channel remains technically intact, the break below the accelerated trendline suggests the market has moved from a period of aggressive progression into a necessary corrective or consolidation phase.

MACD momentum has stalled significantly, with the signal lines beginning to flatten, suggesting a loss of bullish conviction after the recent peak. RSI has retreated from levels near overbought territory to 56.99, reflecting a rapid cooling of upside pressure while remaining in a neutral-to-positive zone. CCI has also plummeted from its previously elevated levels to 49.97, indicating that directional momentum has shifted toward the downside in the near term. From a structural perspective, the focus has moved toward defending the MA20 (88.85); a failure to hold this zone could lead to a deeper test of the 50-day Moving Average (86.07), while a bounce here would keep the long-term bullish narrative intact.

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Chart B: December 2026 EUA Price (EUR) - Technical

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